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All-In [46825]
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So awhile back I asked about investment advice
Jan 15, 2016, 9:02 AM
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I went and spoke to a financial adviser last night. Guy was a really nice guy. Seemed to butter my bread a little too much but he's a salesman so that is expected. Here was his advice:
Don't invest right now (surprising coming from somebody who makes his living off of people investing)
Pay down my highest interest debt (8% on 1600 personal loan).
All of my debt with the exception of student loans will be paid off when I get my tax refund check in a couple of months.
Then in one year start my Roth and 529.
My one concern is that I want to start investing now for the future. I feel like waiting one year will give me less years of retirement on the back end.
For those of you who know, what do you think? Is this sound advice or do I need to go ahead and start investing now.
Also, everything he was telling me to do investment wise, I can do on the vanguard website and the state website without having to pay his 5.5% fee.
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Starter [389]
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Re: So awhile back I asked about investment advice
Jan 15, 2016, 9:06 AM
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The key is to pay off the debt so that you have more money to invest. Many people like Dave Ramsey suggests putting off retirement (temporarily) until you are out of debt except for your home. Logically its hard not to invest immediately but at most I would only invest up to a company match. Then when you have your debt paid off, put 15% of your income into retirement investments. Especially if you are in your 20's you will be fine.
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All-In [46825]
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Re: So awhile back I asked about investment advice
Jan 15, 2016, 9:09 AM
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Me nor my wife has an employer matched plan that is available.
The only thing my district offers is the state retirement
Her place of business has some weird retirement where the owner takes a portion of whatever profit they can spare and divides it up among the employees into a company owned retirement account.
Hench why me AND her are getting roths
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Hall of Famer [21258]
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Check the state retirement.
Jan 15, 2016, 9:11 AM
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It probably has built in matches. Government retirements are typically really good.
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All-In [46825]
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Re: Check the state retirement.
Jan 15, 2016, 9:12 AM
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How much do you know about gov't retirement? The reason why I ask because we are always told it is a percentage of your top 3 years of pay but NOBODY (even at the state department) can tell me what that percentage is.
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Hall of Famer [21258]
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My wife was a teacher. And I just worked with a teacher
Jan 15, 2016, 9:15 AM
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on her financial stuff. It is not a typical "match" like a normal company, but it was clear that what she was putting in was less than what was being shown. The one problem I had with it is there was a set amount you had to put in. She wasnt really in a place to put the whole amount in.
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Orange Blooded [4947]
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Re: Check the state retirement.
Jan 15, 2016, 9:24 AM
[ in reply to Re: Check the state retirement. ] |
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It depends on what type of government job she has. Some are 25% after 30 years, some start at 20 years 20% and go up to 30% at 30.
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All-In [46825]
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Re: Check the state retirement.
Jan 15, 2016, 9:25 AM
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She works for a nursing home. I am a teacher.
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All-In [46825]
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Re: Check the state retirement.
Jan 15, 2016, 9:30 AM
[ in reply to Re: Check the state retirement. ] |
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is that 20% per month or per year? I'm assuming per year which makes me sad.
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Orange Blooded [4947]
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Re: Check the state retirement.
Jan 15, 2016, 10:02 AM
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Yes per year. It is just an addition to your retirement.
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All-In [46825]
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Re: Check the state retirement.
Jan 15, 2016, 10:06 AM
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if it's an addition, what's the base?
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Orange Blooded [3456]
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State retirement is a pretty good deal
Jan 15, 2016, 9:32 AM
[ in reply to Re: Check the state retirement. ] |
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assuming it is still viable 30 years from now, but it is severely mismanaged. The current benefit is roughly half what you averaged over your 12 highest consecutive quarters. Thus if your highest 12 consecutive quarters produce a annual average salary of $100k the benefit is $50k per year. For most state employees your highest 12 consecutive quarters means the last 12 months of your career so it can be difficult to tell now what your benefit will be. There is also an option to take less than half (I think you get around 40%) and your children get a check for life even after you die. The beauty of state retirement is most people hit full vesting while still fairly young. If you went to work for the state after college at 22, you fully vest around 50 years of age. You can continue to work elsewhere while drawing state retirement. If you last held a $100k a year job with the state, you can take your $50k retirement, find a job making $60k and increase your salary $10k a year. Also, there's health insurance.
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All-In [46825]
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Re: State retirement is a pretty good deal
Jan 15, 2016, 9:37 AM
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I understand what you're saying. But the 100K as a teacher made me laugh. Yea I'm eligible for retirement at 50. That's why I'm so concerned about my retirement. We go through swings in teaching where there are either not enough new teachers and they are begging retiring teachers to stay or we have too many new teachers and they are pushing retiring teachers out the door (as the case now). So when I get to 50 and eligible for retirement, I want to be in a good situation to do so because at 50 and being in a career for 28 years it's going to be difficult to transition to another career at that age and stage in my life and start back at the bottom.
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Orange Blooded [3456]
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Yeah, I picked an easy number
Jan 15, 2016, 9:47 AM
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And remember, you don't know where you'll be in 28 years. May be an administrator.
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All-Conference [442]
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My wife just retired as a teacher from South Carolina
Jan 15, 2016, 10:27 AM
[ in reply to Re: Check the state retirement. ] |
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How it is calculated is shown on page 20, 21 of this link:
https://www.peba.sc.gov/assets/scrshandbook.pdf
Basically it is a percentage calculated by 1.82 times years of service. My wife had 31 years of service so that is 31 x 1.82 or 56% of her average pay over highest 3 years. That is huge.
That changed for future, younger retirees to highest 20 quarters (rather than 3 years).
Unused personal leave increases your final calculated pay and unused sick leave increases your time of service. The handbook has lots of other information.
You can also have a SC 401k which has a good choice of target retirement plans so you can pick what stock/bond ratio that you want. SC currently does not have a match.
Understand that I have not found a better state plan anywhere for teachers. You are currently paying 8.15% to South Carolina Retirement System to fund this pension.
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All-In [46825]
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Re: My wife just retired as a teacher from South Carolina
Jan 15, 2016, 10:40 AM
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Thanks so much man I appreciate it. Doesn't look as bad as I thought it was going to be.
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110%er [5093]
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Re: My wife just retired as a teacher from South Carolina
Jan 15, 2016, 12:00 PM
[ in reply to My wife just retired as a teacher from South Carolina ] |
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That's his best bet to just do the 401k deferred comp through the state.
But he's determined to lose himself money for some reason.
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All-In [30593]
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there is a better state....
Jan 15, 2016, 12:20 PM
[ in reply to My wife just retired as a teacher from South Carolina ] |
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in Alaska... teachers pay 7% into state retirement, and the schools match @ 8%. That's 15% going in there. You can also choose to invest seperately in a 457, where the school will match up to 7.5%. That = 30% going in.
the catch... when you teach in Alaska you opt out of social security
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Hall of Famer [21258]
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Do you still have to pay SS?
Jan 15, 2016, 12:47 PM
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If no, then that would be a really good deal. SS is a fraud. I would be able to make probably 4 times what I will get from it.
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All-In [30593]
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no.... you do not pay social security***
Jan 15, 2016, 1:54 PM
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Orange Blooded [2002]
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Re: there is a better state....
Jan 15, 2016, 3:07 PM
[ in reply to there is a better state.... ] |
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I wish I could opt of of social security. I could do much better investing that money myself.
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Hall of Famer [21258]
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HE is absolutely right about your debt.
Jan 15, 2016, 9:07 AM
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Pay that off first. All of it preferably except for the house. Then dont go into debt again, ever, for anything (house is typically acceptable). And then save for retirement. You will be able to put a whole lot more away and one year isnt going to hurt much.
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All-In [46825]
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Re: HE is absolutely right about your debt.
Jan 15, 2016, 9:11 AM
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I think not going into debt in this day and age is almost to near impossible. I think it's more about smart debt than anything. An example would be this past summer I had to purchase an air conditioner because I quickly found out the central unit I had was not big enough to properly cool down the house (stayed at 85 all day and most of the night). However, while this is considered debt, I view it as smart debt because I used a 0% interest credit card and will pay it off long before it starts interest. Just my opinion.
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Hall of Famer [21258]
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That is absolutely wrong. You do not have to go into debt
Jan 15, 2016, 9:18 AM
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at all. Again, the house is the one exception. But cars, student loans, almost everything else you do not have to go into debt. Even medical can be avoided, but you need a 6 month emergency fund. The problem is the lack of delayed gratification.
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All-In [30593]
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and lack of education... and people are far too
Jan 15, 2016, 12:22 PM
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short sighted
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All-In [30827]
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I disagree.
Jan 15, 2016, 9:50 AM
[ in reply to Re: HE is absolutely right about your debt. ] |
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Most people just live above their means and take crappy advice.
When I refied my mortgage the guy handling the paperwork looked at our wages and recommended we purchase a house that was almost double the price of the one we were refying.
His claim was to get deductions on tax returns. I told him I'd rather keep the $24,000 in house payments instead of deducting the $8000 interest.
Most people get suckered into infinity car payments. Vacations.. big tv's. . New furniture. Bowl games.
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CU Medallion [57108]
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5.5% fee? Ouch.***
Jan 15, 2016, 9:12 AM
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All-In [46825]
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Re: 5.5% fee? Ouch.***
Jan 15, 2016, 9:14 AM
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Exactly. I'm thinking since this is an (almost) set it and forget it type investment, I can do the same thing on vanguard with little to no fees.
Roth. 80% in a growth stock fund and 20% in bonds. every 5-10 years move over more % to bonds.
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Hall of Famer [21258]
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The 5.5% fee is a one time initial charge.
Jan 15, 2016, 9:16 AM
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I think that that is Edward Jones.
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Hall of Famer [22944]
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Buy a Target Date fund from Vanguard
Jan 15, 2016, 12:11 PM
[ in reply to Re: 5.5% fee? Ouch.*** ] |
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They automatically handle the rebalancing between stocks and bonds. It's the closest thing to a 'set it and forget it' strategy for the next 30 years. Later you can start thinking about dividend heavy stocks, but I'd start with the Target Date fund.
Plus it's only one number you have to track. Easy.
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Rock Defender [53]
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Sounds like solid advice. Paying off debt with high interest
Jan 15, 2016, 9:13 AM
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is similar to investing.
His fee does sound high.
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Orange Blooded [2986]
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What is the int rate on the student loans?
Jan 15, 2016, 9:15 AM
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If it's 4% or higher, I would pay those down first. Think about this way, you're guaranteed to "gain" 4% by paying it off. Pretty difficult to get 4% in the market right now.
The time lost not investing vs the paying int rate will cancel each other out or you may even come ahead. The market could very well drop even more, then you hit the double whammy.
If your situation is better, then putting some money into Roth/529 isn't a bad idea. You can schedule a monthly deposit so it's not a big hit to your cash flow. Plus, this will be "dollar cost averaging" using a schedule.
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All-In [46825]
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Re: What is the int rate on the student loans?
Jan 15, 2016, 9:23 AM
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Yeah that's what he was talking about. My SL is at 6% as well as my wife's. We are both in forbearance right now. Mine is due to all but like $500 will be waived in November (teacher loan forgiveness) and hers is in forbearance because her payments came due while she was still looking for a job so we requested a 3 month forbearance until she could find a job and we could build some savings. Hers is going to be rough. I only had 6G when I got out paid it down to 4G and got a forbearance to cover up to the 5G waive. The only problem is I timed it wrong and in interest has pushed it a little over 5g but I will only have to pay off like 500 once the forbearance is over.
My highest interest loan right now is the personal loan we took out to buy a small house (3000 paid down to 1600)
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All-In [40100]
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Agreed, pay off the debt. Not sure I would sit out a year,
Jan 15, 2016, 9:21 AM
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things have been brutal these past 6 months or so and MAY be a good time to buy. I would pay off your debt first b/c that's a guaranteed xx% return on your investment. The 5.5% is a huge percent cut, guaranteeing a negative 5.5% loss on your first year return to start. I personally like Vanguard 500 Index fund. It takes out the emotion and it follows the stock market essentially. People will argue something like this, "Well if coke is doing well, it would make since I not include it, so therefore I will recommend better than the Index." I say prove it. Prove to me that over the last 5, 10, 20 years, that you've beat the index. They cannot. Key is to try to put some money away frequently so that you get used to it coming out of your account. You'll quickly get used to the fact that you are living off a touch less. I will say this for this guy you spoke to. It is a good sign that he is recommending you wait. Means he's likely not a vulture. If you feel comfortable reading and moving your money, etc, I think Index funds are a great option. If you're nervous and/or don't want to mess with it at all, get an adviser. Another advantage of financial adviser is he may be able to look at other areas too.
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All-In [40100]
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Should read if coke not doing well, sorry . . .***
Jan 15, 2016, 9:22 AM
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nm
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Hall of Famer [21258]
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Starter [389]
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Re: So awhile back I asked about investment advice
Jan 15, 2016, 9:29 AM
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Debt robs your freedom and greatly diminishes the ability to build wealth. There is absolutely NO GOOD debt. Of course banks want us to believe that but that's because they make all of their money on loan interest payments. Protect yourself and delay pleasure at times to stay out of debt. Your income is your great asset to building wealth and when you diminish it due to debt payments, you put yourself into a bind.
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Orange Blooded [2663]
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he's absolutely right. Pour everything you have into
Jan 15, 2016, 9:37 AM
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paying off the 8% debt. Whatever you could possibly make in a reasonable investment will be less than the 8% getting sucked out of your wallet to pay interest on that.
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CU Guru [1465]
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The one thing you can never recapture is TIME! Start now
Jan 15, 2016, 9:42 AM
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save and pay down debt at same time. Definitely go "direct" on the 529 to avoid the sales charge, but I'd look for experienced, objective advice with your investment allocation.
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Orange Blooded [3456]
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You say he's a salesman
Jan 15, 2016, 9:45 AM
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Is he a fee-only planner or is he a broker? I use a fee-only planner and manage my own funds through Vanguard. I would agree that the 8% loan needs to go before you start investing. That's higher than a conservative market return. He may be telling you to wait a year to build up some cash reserves. Do that. It's painful having a tax bill or expense you weren't expecting hit you when your investments are down and you have no reserves. Now you're selling at a loss to pay a debt. Sucks. Also, sounds like you are in the early phases of your career. Once you start investing, stick with mutual funds for now, something like Vanguard's Total Stock Market Index Fund. Websites like futureadvisor.com are pretty solid and free if you manage your own funds.
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Orange Blooded [2877]
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Re: So awhile back I asked about investment advice
Jan 15, 2016, 9:57 AM
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Vanguard, don't trust that joker. He has to sell to pay his salary, vanguard pays their people well non commission based. What kind of debt do you have, what's the interest on it? Pretty easy math equation if the debts interest is higher than what you would be saving than pay it first, I know you want to get into compounded in 30 years but that won't matter if you principal credits are higher in a year than they are now due to having to pay so much debt. People say just a house, but that is wrong too if the interest rate is too high. Before you start building retirement you need to ensure your current gross is maximized which can be reached in a few different ways depending on your current situation.
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All-In [46825]
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Re: So awhile back I asked about investment advice
Jan 15, 2016, 10:02 AM
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Like I said earlier. All of my debt will be paid off around march or april with the exception of student loans.
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Oculus Spirit [80311]
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He's saying pay off the personal loan because it's 8% and
Jan 15, 2016, 10:05 AM
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more than likely you want get 8% investing right now. That's what I would do to.
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Orange Blooded [2506]
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Just make sure you do a self-directed Roth
Jan 15, 2016, 10:17 AM
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tmail me if you would like. I just converted my standard Roth to a self-directed Roth.
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All-In [46825]
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Re: Just make sure you do a self-directed Roth
Jan 15, 2016, 10:40 AM
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I will do that in a little while. Thanks.
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110%er [5093]
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Re: So awhile back I asked about investment advice
Jan 15, 2016, 11:58 AM
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If you have debt at 8% interest you shouldn't be investing.
Every extra dollar you spend on that debt is an 8% return on your investment. You're not going get a better return in this market.
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Hall of Famer [22944]
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Step 1. Pay off 8% Debt
Jan 15, 2016, 12:22 PM
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Step 2. Save another $1,000-$5,000 emergency fund (depending on your salary)
Step 3. Split money 50/50 between paying off student loans and investing. I recommend 50/50 as it sounds like both are a priority for you, and this is a compromise
Step 4. After loans paid off, redirect more money towards investments. I'd tackle retirement and personal investments first, and save 529s for later. Kids can always help pay for their college. Nobody is helping you with retirement. Or again do a split between investments and 529.
Step 5. Sometime in the future you'll be buying a house. Buy within your means. I support a 50/50 split between paying down mortgage and investing. Others will disagree about paying off house at all (opportunity cost of future value of money). Make your own decision for whatever makes you comfortable.
Step 6. Enjoy your retirement years and give back. Clemson and IPTAY are always good ideas 
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All-In [43676]
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Pretty simple
Jan 15, 2016, 12:26 PM
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In this order:
1-Pay off all of your debt except your mortgage if you have one.
2-Open a roth and max it out
3-If you still have money left over each year, put it into a 529
Doing anything else isn't very smart IMO.
Why pay off the student loans, especially if they are at a low interest rate? Can't you make more on your roth return than the interest on the student loan? Maybe. But, it's a) not guaranteed that you do so and b)adopting the mentality to live debt free will serve you better and longer throughout your life.
Save for YOUR retirement before you worry about college. Then deal with college.
Investing into a roth or 529 while paying non-mortgage interest is like running on a treadmill backwards.
BTW, you ARE investing in the future by paying off debt. Yes waiting will give you less in retirement, but not to the extent that carrying debt will.
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Hall of Famer [21258]
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Saw TRD posting in mange. Thought trolling.
Jan 15, 2016, 12:49 PM
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Surprised. And totally agree 100%
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CU Guru [1119]
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Babysteps:
Jan 15, 2016, 2:02 PM
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1) Save up a $1000 emergency fund
2) Pay off all debt (other than house) from smallest to largest while paying the minimum payments on everything else
3) Once debt free, save up 3-6 months of expenses as your emergency fund
4) Once you have a robust emergency fund, invest 15% of your total gross income into retirement (roth, etc)
5) Invest in college funds for your kids
6) Pay off your home
7) Build your wealth and give!
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Legend [16506]
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ALWAYS start by getting rid of debt. You also must invest
Jan 15, 2016, 3:16 PM
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in a work 401k at least up to the company match. You can't miss the company match: it's free money!
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1st Rounder [649]
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Joined: 8/7/05
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Re: So awhile back I asked about investment advice
Jan 15, 2016, 3:28 PM
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Never pay an investment advisor anything like that unless you have millions. Even in boom years you'd need at least half a year to show profit beyond what he's charging you. He's right this is a chippy market. Wait til the WSJ says it is the darkest hour and when people start jumping off buildings that's the time to buy. Then regardless of your choice of IRA or the like, look for an indexed fund for the S&P 500 or DJI A. Buy a subscription to Money Magazine or Kiplinger, that'll give you as good advise and more for $25
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Head Coach [790]
TigerPulse: 100%
Posts: 1597
Joined: 9/9/04
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Agreed..I learned the hard way***
Jan 15, 2016, 3:33 PM
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